Oilseeds processing business--------------------------------------------
Biochemical and biofuel business--------------------------------------------
Rice processing andtrading business--------------------------------------------
Market position:
One of the largest vegetable oil and oilseed meal producers in China
Major products:
Soybean oil, palm oil, rapeseed oil and oilseed meals
Major brands:
Fuzhanggui (福掌柜 ), Sihai (四海 ), Xiyingying (喜盈盈 ) and Guhua ( 谷花 )
Market position:
China’s leading supplier of packaged rice
and largest rice exporter and importer
Major products:
Rice
Major brands:
Fortune ( 福臨門 ), Jinying ( 金盈 ),
Five Lakes ( 五湖 ), Golden Terra ( 金地 ),
Xin ( 薪 ) and Donghai Mingzhu ( 東海明珠 )
Market position:
One of the largest corn processors in
China and a leading fuel ethanol producer
Major products:
Biochemical: Corn starch, sweeteners,
crude corn oil, monosodium glutamate
(MSG) and feed ingredients
Biofuel: Fuel ethanol, consumable alcohol,
anhydrous ethanol, crude corn oil and
distiller’s dried grains with solubles
(DDGS)
------------ Our ccore busineess
Wheat processing business--------------------------------------------
Brewing materials business--------------------------------------------
Market position:
One of the largest wheat processors
in China
Major products:
Flour, noodles and bread
Major brands:
Fortune ( 福臨門 ) and
Xiangxue ( 香雪 )
Market position:
A leading brewing material supplier
in China
Major products:
Malt
Contents
Corporate Information
Financial Highlights
Capacity Distribution
Chairman’s Statement
Managing Director’s Report
Management Discussion and Analysis
Five-Year Financial Summary
Corporate Governance Report
Risk Management
Directors and Senior Management Profile
Report of the Directors
Audited Financial Statements
Independent Auditors’ Report
Consolidated Statement of Profit or Loss
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Statement of Financial Position
Notes to the Financial Statements
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CHINA AGRI-INDUSTRIES HOLDINGS LIMITED1 2014 Annual Report
DirectorsChairman of the Board and Non-executive DirectorYU Xubo
Executive DirectorsYUE Guojun (Managing Director)SHI Bo
Non-executive DirectorsNING GaoningCHI JingtaoMA Wangjun
Independent Non-executive DirectorsLAM Wai Hon, AmbroseVictor YANGPatrick Vincent VIZZONEONG Teck Chye
Audit CommitteeLAM Wai Hon, Ambrose (Chairman)Victor YANGPatrick Vincent VIZZONEONG Teck ChyeCHI JingtaoMA Wangjun
Remuneration CommitteeVictor YANG (Chairman)CHI JingtaoMA WangjunLAM Wai Hon, AmbrosePatrick Vincent VIZZONEONG Teck Chye
Nomination CommitteeYU Xubo (Chairman)CHI JingtaoLAM Wai Hon, AmbroseVictor YANGPatrick Vincent VIZZONEONG Teck Chye
Executive CommitteeYUE Guojun (Chairman)SHI Bo
Qualified AccountantCHAN Ka Lai, Vanessa
Company SecretaryLOOK Pui Fan
AuditorsErnst & YoungCertified Public Accountants
Legal AdvisorHerbert Smith Freehills LLP
Registered Office31st Floor, Top Glory Tower262 Gloucester RoadCauseway Bay, Hong Kong
Share Registrar and Transfer OfficeTricor Progressive LimitedLevel 22, Hopewell Centre183 Queen’s Road EastHong Kong
Principal BankersAgricultural Bank of China LimitedAgricultural Development Bank of
ChinaAustralia and New Zealand Banking
Group LimitedBank of China LimitedBank of China (Hong Kong) LimitedChina Construction Bank (Asia)
Corporation LimitedDeutsche BankIndustrial and Commercial Bank of
China LimitedRabobank International
(Hong Kong Branch)Standard Chartered Bank
(Hong Kong) LimitedThe Bank of Tokyo-Mitsubishi
UFJ, Ltd.
Investor RelationsFAN Wing Yu, WinnieTelephone: +852 2833 0606Facsimile: +852 2833 0319E-mail: [email protected]
Company Websitewww.chinaagri.com
Stock Code606
2
For the year ended 31 December 2014
Unit 2014 2013Increase/
(Decrease)
(Restated)
Revenue: HK$ million 93,238.7 94,543.0 (1%)
– Oilseeds processing HK$ million 53,713.5 57,535.7 (7%)
– Biochemical and biofuel HK$ million 16,540.0 15,514.1 7%
– Rice processing and trading HK$ million 7,746.4 7,744.9 0%
– Wheat processing HK$ million 9,002.1 8,560.2 5%
– Brewing materials HK$ million 2,738.8 2,170.0 26%
– Corporate and others HK$ million 3,497.9 3,018.1 16%
Profit/(Loss) before tax HK$ million (338.2) 2,236.7 (115%)
Operating profit/(loss) (segment results) HK$ million (398.2) 2,212.4 (118%)
Operating profit before depreciation andamortisation HK$ million 1,274.8 3,641.0 (65%)
Operating margin % (0.4) 2.3 N/A
Profit/(Loss) attributable to owners of theCompany HK$ million (775.4) 1,568.5 (149%)
Earnings/(Loss) per share:
– Basic HK cents (14.77) 29.88 (149%)
– Diluted HK cents (14.77) 29.78 (150%)
Dividends per share for the year:
– Interim HK cents – 3.1 N/A
– Proposed final HK cents – 4.1 N/A
Total assets HK$ million 78,561.3 82,769.3 (5%)
Equity attributable to owners of the Company HK$ million 28,075.1 28,982.7 (3%)
Closing price per share at year-end HK$ 3.20 3.87 (17%)
Market capitalisation at year-end HK$ million 16,799.6 20,317.0 (17%)
Net asset value per share at year-end HK$ 5.35 5.52 (3%)
Net gearing ratio at year-end % 67.9 67.1 N/A
3 2014 Annual Report CHINA AGRI-INDUSTRIES HOLDINGS LIMITED
Oilseeds processing
Rice processing and trading
Biochemical
Biofuel
Brewing materials
Wheat processing
Shaanxi
Ningxia
Sichuan
Guizhou
InnerMongolia
Yunnan
Qinghai
Xinjiang
Tibet
Gansu
Guangxi
Chongqing
Yellow Sea
Heilongjiang
Jilin
Liaoning
Shandong
Henan
Hunan
ShanxiHebei
Tianjin
Hainan
Guangdong Taiwan
FujianJiangxi
Shanghai
Zhejiang
Anhui
Jiangsu
Hubei
Hong KongMacau
South China Sea
East China Sea
Beijing Bohai
4
2014 Capacity Unit: metric ton ’000
Oilseeds Processing
Crushing Capacity 11,580
Jiangsu 3,600
Shandong 2,280
Guangxi 1,740
Tianjin 1,200
Hubei 840
Guangdong 720
Liaoning 600
Jiangxi 300
Anhui 300
Refining Capacity 4,330
Jiangsu 1,110
Tianjin 720
Shandong 660
Guangdong 440
Guangxi 420
Hubei 360
Jiangxi 180
Anhui 180
Chongqing 180
Liaoning 80
Biochemical and Biofuel
Biochemical (Corn Processing Capacity) 2,450
Jilin 1,850
Heilongjiang 600
Sweetener Production Capacity 1,040
Jilin 490
Shanghai 250
Hubei 100
Hebei 100
Sichuan 100
Monosodium Glutamate (MSG) Production Capacity 100
Heilongjiang 100
Biofuel 1,800
Heilongjiang (Corn Processing Capacity) 1,200
Guangxi (Tapioca Processing Capacity) 600
Fuel Ethanol, Consumable Ethanol and Anhydrous Ethanol Production Capacity 600
Heilongjiang 400
Guangxi 200
2014 Capacity Unit: metric ton ’000
Rice Processing and Trading
Rice Production Capacity 2,445
Heilongjiang 640
Liaoning 425
Jiangsu 255
Jilin 220
Jiangxi 220
Anhui 195
Hubei 190
Hunan 165
Ningxia 75
Sichuan 60
Wheat Processing
Wheat Processing Capacity 3,451
Henan 1,320
Zhejiang 600
Hebei 340
Jiangsu 321
Liaoning 280
Sichuan 240
Fujian 180
Shandong 170
Noodle Production Capacity 195.3
Henan 66
Liaoning 48
Hebei 19.8
Zhejiang 18
Jiangsu 18
Sichuan 18
Shandong 7.5
Bakery Production Capacity 1.98
Beijing 1.98
Brewing Materials
Malt Production Capacity 740
Liaoning 360
Jiangsu 300
Inner Mongolia 80
5 2014 Annual Report CHINA AGRI-INDUSTRIES HOLDINGS LIMITED
Dear Shareholders,
In 2014, China’s economy faced greater downward pressure as reforms to the economic system
deepened. Slower macroeconomic growth had an adverse impact on our markets as well as the
end users of our products. Unusually, we did not see the traditional peak season effect in any of
our major products. Across the board, we saw weak markets in oils, rice, wheat, feed grains and
starch. At the same time, commodity price swings on the global market have been dramatic due to
growing complexity in the global economy, which in turn reduced forward visibility and predictability.
The agricultural processing sector experienced problems in both production and operations, with
most companies showing declining performance. The oilseeds processing business of China Agri-
Industries Holdings Limited (“China Agri” or the “Company”) was hit hard. Price volatility was greater
than anticipated and affected oilseed markets during much of the year, resulting in losses for the
segment and the Company as a whole, despite stable and even positive performances by other
business segments.
In terms of its stage of development, the Company is a domestic market leader, with competitive
advantages across its business portfolio. It is now poised to translate these advantages to higher
level of performance. We do not anticipate any impact on our business model or operational structure
as a result of the short-term, cyclical issues we faced in 2014. We are in fact looking at the downturn
as an opportunity to develop internal systems that will aid in our recovery and allow rapid progress in
operations. Management has set out targets and objectives for internal systems development, and
will be monitoring the implementation. The Board of Directors remains confident in sustaining long-
term growth of the Company as it continues strengthening the foundation of the business.
The Company maintains high standards of corporate governance through its Board of Directors. Our
directors are committed and have well defined management responsibilities. Management is held
responsible for timely and transparent disclosure of business information to shareholders. We have
a strict code of business ethics and endeavor to meet our community and social responsibilities,
protect the environment, and provide benefits to the public through corporate philanthropy. We
view both our code of ethics and corporate social responsibility as essential to sound business
management and value creation. In order to support the national grain policy and to protect the
interest of farmers, the Company participates in the national grain purchase and storage program as
well as grain inventory auctions.
The “new norm” of China’s economy in 2015 will set much higher standards for business, as
consumer demand strengthens and industry moves up the value chain. Public policy is putting
pressure on state-owned enterprises (SOEs) to improve profitability and become more dynamic
and market-oriented. China Agri will take advantage of the momentum from SOE reforms to adopt
a consumer-facing management style. It is extending its industrial value chain by introducing a
6
development plan for refined and deep-
processed food products as new growth
drivers. COFCO Corporation, China
Agri’s parent company, has developed an
international presence through acquiring
assets in the upstream space that will
provide many new prospects for future
development, creating opportunities
for China Agri as well. China Agri is
currently in touch with these new assets
for information exchange on markets
and other matters, in order to learn
new management techniques and gain
knowledge in a variety of markets as well
as learn ways to be more responsive to
industry risks.
Finally, I would like to take this opportunity
to extend my heartfelt gratitude to our
shareholders, customers and business
partners for their continued support. I
would also like to thank the members
of our Board, the management and our
hard-working staff for their diligence and
aspiration.
YU XuboChairmanHong Kong, 25 March 2015
7 2014 Annual Report CHINA AGRI-INDUSTRIES HOLDINGS LIMITED
In 2014, China Agri’s overall performance fluctuated in a wide range due to the severity of the
business environment for China’s oil and grain processing industries, driving an aggregate loss of
HK$775.4 million.
During the year, the greatest challenges were in the oilseeds processing business, exacerbated
by soft downstream demand. Despite a rebound in profits in the fourth quarter, industry losses in
the first six months and a volatile market in the third quarter translated into a full-year loss for the
Company. Other business segments maintained smooth operations and steady growth. The biofuel
business was profitable, and biochemicals boost earnings with its highly competitive products while
corn processing faced a tough environment. In the rice processing business, the focus was on
reducing costs and creating a better portfolio structure of end products in order to reduce losses,
while building on its dominant position in terms of import channels and the geographical spread
of domestic production. New capacity in our wheat processing business benchmarked against
established factories, working to improve systems and operations in new geographic regions for
the Company, in order to sustain growth in sales volume. The brewing materials business hit new
records in sales volume and profitability by taking advantage of a stable, mature operating system
and market opportunities.
As a major agricultural processing enterprise, China Agri has developed industry-leading operating
and financial metrics, together with an impressive geographic spread in terms of its manufacturing,
processing, and distribution assets. While losses in 2014 are unlikely to affect the Company’s long-
term development direction, management took note of the weak results for the year, and reflected on
the need to improve and to strengthen its foundation in certain areas, particularly on its professional
management capacity to cope with and adapt to the fast-changing market conditions, and
developing a more complete set of systems integration for risk management.
Looking ahead to 2015, the external business environment will remain challenging. Despite an
abundant supply of agricultural commodities in international markets and weaker raw materials
prices, raw grain prices in China will remain at a high level due to policy support while slower
economic growth will depress end demand for agricultural products. Overcapacity will squeeze
margins in the oil and grain processing industries. In addition, the impact of increasing volatility of
the renminbi exchange rates would present new challenges. Given the long-term trends for declining
growth, overcapacity and intense competition in the domestic market, China Agri will work towards
greater professionalisation, business acumen and operational efficiencies, while developing highly
focused strategies to cope with critical industry and business issues.
8
YUE GuojunManaging DirectorHong Kong, 25 March 2015
Over the past three years, China Agri
has made continuous progress with
management benchmarking. In 2015, we
will focus on combining benchmarking with
building a learning organisation and process
reengineering, in order to introduce a more
scientific and systematic approach to
management. Benchmark management tools
will be applied to assessment and incentive
systems in order to energise the business.
China Agri will use its fundamental risk
management and producer competencies
to improve the competitiveness of its
products as well as to extend the depth
and scope of the product chain to meet
customer demand. We will use research and
development to support our capacity as a
technology and solutions provider, as well
as to produce innovations and advances in
our business model and adapt to market
competition.
Management Discussion and Analysis
+Oilseeds Processing Business
+Biochemical and Biofuel Business
+Rice Processing and Trading Business
+Wheat Processing Business
+Brewing Materials Business
11 2014 Annual Report CHINA AGRI-INDUSTRIES HOLDINGS LIMITED
Business Review
Oilseeds Processing Business
China Agri is one of the largest vegetable oil and
oilseed meal producers in China. Its products include
soybean oil, palm oil, rapeseed oil and oilseed meals,
which are sold under the brand names “Fuzhanggui”
(福掌柜), “Sihai” (四海), “Xiyingying” (喜盈盈) and “Guhua” (谷花).
During the year under review, international soybean
prices first rose due to tight old-crop stockpiles in
the United States before falling on harvest pressures
from bumper new crops. An excessive supply in the
domestic market along with weak consumption drove
product prices to record historical lows. Oilseed meal
prices were depressed as a result of sluggishness in
the downstream breeding industry. Volatility in the
vegetable oil and oilseed meal markets posed great
challenges to the industry, especially in the first half
of the year.
From an operational perspective, the oilseeds
processing business maintained stable production
and operations in 2014. Sales volume of major
products rose 10.5% year on year to 9,936,000
metric tons. Nevertheless, the business reported
a year-on-year decrease of 6.6% in revenue to
HK$53,713.5 million due to an overall decline in
product prices. Price fluctuations impacted earnings.
Industry-wide losses in the first half of the year
and a further downturn in the third quarter hurt
the Company’s performance. As inventory costs
gradually came down in the fourth quarter, as the
Company worked to optimise its cost structure,
the oilseeds processing business ended the year
with a smaller loss. The Company responded to a
complex business environment by reorganising and
applying value analysis to every link of its supply
chain and implementing stringent cost controls.
These processes helped to strengthen and improve
management.
Low Res
12
MANAGEMENT DISCUSSION AND ANALYSIS
As of 31 December 2014, the Company operated
a total of 17 oilseeds-processing plants in Liaoning,
Tianjin, Shandong, Jiangsu, Guangxi, Hubei, Jiangxi,
Anhui, Chongqing, Guangdong, and Xinjiang. The
plants had a combined annual crushing capacity
of 11,580,000 metric tons and a combined refining
capacity of 4,330,000 metric tons, collectively
representing one of China’s largest crushing and
refining operations.
In 2015, current market forecast indicates oversupply
and slower demand trend for soybeans in the
international market. Raw material prices are likely
to stay low and fluctuate within a narrow range. As
slower economic growth becomes the new norm
in China, there will be supply pressure on product
markets while demand will remain soft. Given the
complexity of the market, the Company will aim at
operational stability. Meanwhile, it will strengthen
market research and risk management, factory-
level management, sales channels, and resource
allocation. It will seek to meet challenges proactively
and strive for stability.
13 2014 Annual Report CHINA AGRI-INDUSTRIES HOLDINGS LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS
Biochemical Business
The Company’s biochemical business is primarily
engaged in the processing of corn. Its products
include cornstarch, sweeteners (including
maltodextrin, fructose syrup, maltose syrup and
other sweeteners), monosodium glutamate (MSG),
crude corn oil, and feed ingredients.
During the year under review, corn prices trended up
despite an abundant supply on the domestic market.
The main factors supporting high prices were the
government’s stockpiling and auction policies and its
incentive program to subsidise transport of northern
grain to southern consuming markets. However,
demand for downstream products was weak, with
soft prices for cornstarch. Market competition put
pressure on profits in the sweetener segment as
well. In response to these challenges, the Company
monitored the government corn reserves and auction
policies, and adopted flexible procurement strategies
in order to reduce cost pressure, while using its
strengths in geographic distribution to participate in
the temporary corn reserve scheme in order to earn
extra income.
Biochemical and Biofuel Business
In 2014, the Company’s biochemical and biofuel revenues totaled HK$16,540.0 million, an increase of 6.6% year-
on-year. The segment’s gross margin fell slightly to 12.0% from 13.5% in 2013.
Over the course of 2014, the Company leveraged its
technological superiority and high quality products
in order to expand market share, while upgrading
customer services to reinforce strategic partnerships
with key customers. Sales volume of sweeteners rose
by 17.8% year-on-year to 681,000 metric tons. As
a result, segment revenue for biochemical increased
year-on-year despite falling product prices.
As of 31 December 2014, the Company had a total
of eight factories in Jilin, Heilongjiang, Shanghai,
Hubei, Hebei and Sichuan, with an annual corn
processing capacity of 2,450,000 metric tons
and an annual sweetener production capacity of
1,040,000 metric tons. The Company’s MSG facility
in Heilongjiang, which has a production capacity of
100,000 metric tons, increased capacity utilisation
and is on its way to stabilising production volumes.
In 2015, corn supply will remain plentiful on the
domestic market. The government policy will be
the major factor affecting prices. The Company will
focus on monitoring government reserve and auction
14
MANAGEMENT DISCUSSION AND ANALYSIS
policies, adopt flexible procurement strategies to
control raw material costs. In addition, the Company
will use benchmark management strategies to
strengthen professional capacity, operational
efficiency and cost management across this business
segment in response to the weakness in the industry.
By leveraging its competitive advantages in technical
know-how and its diversified customer base, the
Company will be able to increase the sales of
sweeteners, MSG and other downstream products,
making use of pricing premiums and an upgraded
product mix to generate profits.
Biofuel Business
The Company is one of China’s major fuel ethanol
producers, using corn and tapioca as raw materials.
The Company’s biofuel products include fuel ethanol,
anhydrous ethanol, consumable alcohol, crude corn
oil and distiller’s dried grains with solubles (DDGS).
During 2014, the market for fuel ethanol reflected
cyclical factors. In the first half, prices were high.
However, during the second half of 2014, a sustained
slide in gasoline prices put pressure on settlement
prices for fuel ethanol, affecting earnings to a certain
extent. Despite these adverse impacts, the Company
was able to reduce costs and expenses on a year-
on-year basis, by making improvements in business
processes that increased production and operational
efficiencies. Profit in the first half helped the Company
to end the year with increased earnings.
As of 31 December 2014, the Company had one
factory in Heilongjiang and one factory in Guangxi.
Combined production capacity of the two factories
was 600,000 metric tons of fuel ethanol, anhydrous
ethanol, and consumable alcohol.
International prices for crude oil have been depressed
due to a combination of oversupply and geopolitical
factors, hurting prices on the domestic market for
both gasoline and fuel ethanol. These business
challenges are likely to continue into 2015. In order
to overcome these industry hurdles, the Company
will work to source low-cost feedstock by making
use of its competitive advantage in procurement
and seek appropriate cost-saving strategies in every
phase of production phase. Moreover, the Company
will remain attentive to gasoline price movements
and make prompt adjustments to production and
sales of fuel ethanol. The Company will seek support
from regulators for fuel ethanol producers during
this period when low gasoline prices are affecting
profitability.
15 2014 Annual Report CHINA AGRI-INDUSTRIES HOLDINGS LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS
Rice Processing and Trading Business
China Agri is engaged in the processing and trading
of rice. The Company is a leading packaged rice
supplier and the largest rice exporter and importer in
China. Its package rice products are primarily sold
under the brands “Fortune” (福臨門), “Five Lakes” (五湖) and “Jinying” (金盈). The key markets for its international trading business include Japan, South
Korea, Hong Kong, and Macau as well as other
major rice-consuming and producing regions within
Asia.
In 2014, demand for rice in China remained stable.
The floor price imposed by the government provided
periodic support for paddy prices. Access to low-
cost grains and the ability to dominate market
channels were key competitive advantages in the
industry. In the package rice business, the industry
saw higher levels of demand for mid-to-high-end
products. As industry leaders continued to invest
in the package rice market, industry consolidation
combined with increasing brand awareness and
sensitivity on the part of the consuming public.
The Company’s rice business had total revenue
of HK$7,746.4 million, with domestic sales of
1,033,000 metric tons, and export sales of 228,000
metric tons. After a few years of relentless effort,
the rice business has established a national sales
network for its small package rice products. It has
focused on brand development, expansion of the
supply chain, and sales, which has led to a steady
expansion of scale in its small package rice business.
It has also expanded its product mix in support of
premium pricing. Operations costs have come down,
reflecting a nation-wide network of factories close to
grain supplies. Lower procurement costs and higher
capacity utilisation rates are reflected in an increase
in segment gross margin to 9.7%.
As of 31 December 2014, the Company operated
17 rice-processing plants in Heilongjiang, Liaoning,
Jiangsu, Jilin, Jiangxi, Anhui, Ningxia, Sichuan, Hubei
and Hunan, with a combined annual production
capacity of 2,445,000 metric tons, some of which are
16
MANAGEMENT DISCUSSION AND ANALYSIS
newly completed and have been put into operation.
The Company has a network of factories covering
the nation’s main paddy rice-producing regions,
which provides direct access to raw materials.
In 2015, the small package rice market will offer
many opportunities. The Company will continue to
expand the market for branded rice. It will increase
the number of sales channels via third-party
distributors, direct sales, and e-commerce, leading
to increased scale and better capacity utilisation. In
order to grow the business further, the Company will
introduce more efficient organisation to its supply
chain networks and management systems. As state
reserve policies will retain an influential role in grain
pricing, the Company will adapt its procurement
strategy to these policies and to domestic grain
markets while maintaining strict control over raw
material costs and taking advantage of import
channels as international pricing and availability
permit.
17 2014 Annual Report CHINA AGRI-INDUSTRIES HOLDINGS LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS
Wheat Processing Business
China Agri is one of the largest wheat processors in
China. Its products include general purpose flour,
special purpose flour, noodles and bread products,
which are sold under the brand names “Xiangxue”
(香雪) and “Fortune” (福臨門).
In 2014, despite ample harvests, prices were high
for domestic wheat supplies due to price support
policies. On the demand side, there were slower
sales for downstream products as well as a weak
feed grain market, putting downward pressure on
bran prices and reducing overall profit margins for
wheat processors. At the same time, major wheat
processors increased capacity, accelerating industry
consolidation and leading to heightened competition
among players.
During the year, the Company’s wheat processing
business reported revenue of HK$9,002.1 million.
Sales volume of flour increased 2.6% year-on-year to
1,816,000 metric tons, while sales volume of noodles
increased 5.0% year-on-year to 110,000 metric
tons. The Company focused on key customers
nationwide. In its new production plants, it stressed
the strengthening of its sales and marketing capacity
to better serve local markets by establishing a sales
network for its branded wheat products. At the same
time, it launched its small-package product business
in key cities. The business segment’s gross margin
remained low at 5.8%, as a result of both sluggish
demand and intensified competition.
As of 31 December 2014, the Company operated 13
plants in Henan, Zhejiang, Hebei, Jiangsu, Liaoning,
Sichuan, Fujian, Shandong and Beijing, with total
annual processing capacity of 3,451,000 metric tons
of wheat, 195,000 metric tons of noodles and around
2,000 metric tons of bread products.
Looking ahead, the overall market will be affected
by a slower pace of growth in the national economy
as well as high levels of industry restructuring and
consolidation. 2015 will see intensified competition
in the domestic wheat processing industry.
The Company will make use of its traditional
advantages in its key customers business, integrated
management and customer services, in order to
increase sales volumes and improve operational
efficiency. In addition, the roll out of promotion
campaign for its branded products will diversify the
Company’s business model and help to reinforce its
leading market position.
18
MANAGEMENT DISCUSSION AND ANALYSIS
Brewing Materials Business
The Company is a leading supplier of brewing
materials in China. It is engaged in the production
and sales of malt. Sales are to the domestic market
and other Asian countries and regions.
China’s beer market entered a mature stage with
slower growth in terms of demand in 2014. Despite
the slower growth rate, demand for imported
brewery materials boomed on lower domestic
production of barley. Increased levels of purchasing
of feed barley from domestic sources was another
factor maintaining strong prices for imported barley,
translating into cost pressures, despite ample global
supply.
During the year under review, the Company used
its distribution, geographic, and scale advantages
in the competition for imported product, relying on
its extensive network of import channels for barley
as well as the location and scale of its coastal
plants to fill its processing pipeline. The Company
also capitalised on the FIFA World Cup football
season to explore demand for high-quality and
differentiated malt products with its large brewery
customers. Sales of malt products increased 38.7%
year-on-year to a record 687,000 metric tons in
2014, delivering revenue of HK$2,738.8 million. The
Company leveraged its supply chain to enhance
operational efficiency and lower production costs.
Segment gross margin reached a record high in the
Company’s history.
As of 31 December 2014, the combined annual
processing capacity of the Company’s three malt-
processing plants in Liaoning, Jiangsu and Inner
Mongolia was 740,000 metric tons. The plants in
Liaoning and Jiangsu are close to coastal ports. Their
location made it possible to respond to the demand
trend for mid-to-high-end products. The plant in
Inner Mongolia produces brewing materials using
domestic sources of barley, satisfying the demand
for diversified products.
In 2015, malt consumption will remain stable while
the brewing materials business will face challenges
caused by high inventory levels among breweries. As
the brewery industry restructures and consolidates,
market structure will undergo certain changes.
The malt market will see a continued migration
towards high-end and differentiated products.
While maintaining its traditional competence in
procurement, the Company will follow the current
trend towards developing downstream businesses
and higher value-added products. It will seek to
leverage its advantage in scale and technology,
improve product quality and introduce price
premiums reflecting market demand and increased
product quality. It will also work on optimising its
customer base. All of these will help to support its
dominant position in the industry.
19 2014 Annual Report CHINA AGRI-INDUSTRIES HOLDINGS LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS
Financial Review
Overview of Financial Results for the Year Ended 31 December 2014
Revenue
2014 2013HK$ million HK$ million
Business units:
Oilseeds processing 53,713.5 57,535.7
Biochemical and biofuel 16,540.0 15,514.1
Rice processing and trading 7,746.4 7,744.9
Wheat processing 9,002.1 8,560.2
Brewing materials 2,738.8 2,170.0
Corporate and others 3,497.9 3,018.1
93,238.7 94,543.0
Sales volume of major products of the Group grew steadily during the year ended 31 December 2014, while
prices of major products fell. The impact of weak prices was felt in a decline of 1.4% in revenue to HK$93,238.7
million from a year earlier.
Gross Profit and Gross Profit Margin
During the year, the gross profit of the Group dropped by HK$1,374.3 million to HK$4,329.2 million from a year
earlier as restated. Overall gross profit margin was 4.6% (2013: (restated) 6.0%). During the year, the oilseeds
processing industry faced major challenges, which impacted the gross profit margin of the Group’s oilseeds
segment. Gross profit was stable in the biochemical and biofuel business. The rice processing and trading
business increased its gross profit margin by upgrading its product portfolio and increasing operational efficiency.
Gross profit margin declined in the wheat processing business as a result of intense competition within the
industry and sluggish demand for its products. Rising demand for imported malt helped the brewing materials
business to post a record high in both sales volume and gross profit, making it possible to maintain profitability
above the industry average.
Other Income and Gains
During the year, the Group used cash management effectively to offset part of the exchange losses on Renminbi
depreciation against United States dollars, as well as to generate more interest income. Other income and gains
of the Group decreased by HK$469.2 million year-on-year to HK$1,625.0 million, due to the significant exchange
gain earned on Renminbi appreciation in 2013.
20
MANAGEMENT DISCUSSION AND ANALYSIS
Selling and Distribution Expenses
Selling and distribution expenses were HK$3,318.2 million (2013: HK$3,170.0 million) for the year ended 31
December 2014, representing 3.6% (2013: 3.4%) of total revenue of the Group. The increase in the selling and
distribution expenses was due to higher logistics costs arising from the increase in sales volume of sweeteners
and malt products during the year.
Administrative Expenses
Administrative expenses consist of employee compensation, depreciation and amortisation, as well as daily
operating costs. During the year, administrative expenses of HK$1,971.3 million was comparable to the 2013
expenses for this line item, due to the Group’s efforts to monitor operating expenses and reduce wastage in daily
operations.
Finance Costs
During the year, finance costs of the Group rose 9.4% from a year earlier to HK$650.5 million due to an increase
in overall average bank borrowings even with a decline in average lending rates. An analysis of finance costs by
category is as follows:
2014 2013 HK$ million HK$ million
Interest on:
Bank loans wholly repayable within five years 564.3 394.4
Bank loans wholly repayable over five years 37.5 32.6
Loans from fellow subsidiaries wholly repayable within five years 17.2 62.5
Loans from the ultimate holding company wholly repayable within five years 12.8 26.3
Loans from an intermediate holding company wholly repayable within five years 1.4 49.2
Convertible bonds 33.6 75.3
Total interest expenses on financial liabilities not at fair value through profit or loss 666.8 640.3
Less: Interest capitalised (16.3) (45.9)
650.5 594.4
Loss Attributable to Owners of the Company
During the year, losses generated by the oilseeds processing business weighed upon other business
segments, which recorded steady growth and stable performance while the oilseeds processing business faced
unprecedented challenges in its operating environment. The Group posted a loss attributable to owners of the
Company of HK$775.4 million (2013: (restated) a profit of HK$1,568.5 million).
21 2014 Annual Report CHINA AGRI-INDUSTRIES HOLDINGS LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS
Final Dividend
The Board does not recommend the payment of a final dividend for the year ended 31 December 2014 (2013: 4.1
HK cents per share).
Significant Investments Held and Material Acquisitions and Disposals of Subsidiaries
On 11 August 2014, two non-wholly-owned subsidiaries of the Company, namely COFCO Excel Joy (Tianjin)
Co., Ltd. (“COFCO Excel Joy”) and Tianjin COFCO Excel Joy Lingang Storage Co., Ltd. (“Excel Joy Storage”)
entered into the Absorption and Merger Agreement. Pursuant to which, Excel Joy Storage has been merged and
absorbed by COFCO Excel Joy in which the Group’s shareholding has been adjusted. Further details are given
on page 169 of this annual report.
Save as disclosed in this annual report, the Group did not have any other significant investments held nor any
material acquisitions and disposals of subsidiaries during the year.
Working Capital and Financial Policy
The Group closely monitors the liquidity of funding and the availability of financial resources to ensure that
cash inflows generated from operating activities together with undrawn banking facilities are sufficient to meet
the demands required for day-to-day operations, loan repayments, capital expenditure and potential business
expansion opportunities. During the year, the Group’s operations were financed primarily by accumulated surplus
and bank borrowings.
The Group entered into the financial services agreement with COFCO Finance Co., Ltd. through COFCO Agri-
Industries Management Co., Ltd. (a subsidiary of the Company) for the purpose of achieving more efficient
deployment and application of funds within the Group so as to reduce the average borrowing costs and better
facilitate intra-Group settlement services. During the year, the Group enhanced the liquidity of funds, reduced
finance costs and effectively monitored the internal use of funds through this treasury platform.
By closely monitoring its exposures to fluctuation in commodity prices, the Group enters into appropriate amount
of the commodity futures contracts to timely hedge its risks associated with price fluctuations in raw material
purchases or sales of the related products.
Cash and Bank Deposits
Cash and bank deposits (including pledged deposits) of the Group were HK$12,578.5 million as at 31 December
2014 (31 December 2013: HK$13,944.4 million). During the year, the Group recorded net cash inflow from
operating activities of approximately HK$1,778.8 million (2013: (restated) HK$4,473.3 million). These funds were
mainly denominated in Hong Kong dollars, Renminbi and United States dollars.
22
MANAGEMENT DISCUSSION AND ANALYSIS
Bank Loans and Other Borrowings
Total interest-bearing bank loans and other borrowings (including the liability component of convertible bonds)
amounted to HK$31,635.8 million (31 December 2013: HK$33,390.7 million) as at 31 December 2014. The
borrowings were mainly used for the daily operation and business expansion of the Group. These loans are
repayable within the following periods:
31 December 31 December2014 2013
HK$ million HK$ million
Within one year or on demand 30,588.4 30,233.4
In the second year 513.3 2,352.7
In the third to fifth years, inclusive 182.3 461.9
Beyond five years 351.8 342.7
31,635.8 33,390.7
Interest-bearing bank loans carried annual interest rates ranging between 0.95% and 6.55% (31 December 2013:
between 0.83% and 6.55%). Other borrowings (including the liability component of convertible bonds) carried
annual interest rates ranging between 1.16% and 5.60% (31 December 2013: between 1.16% and 3.40%). These
interest-bearing bank loans and other borrowings were denominated in Hong Kong dollars, Renminbi and United
States dollars.
As at 31 December 2014, the Group has pledged assets, including property, plant and equipment and land use
rights, with an aggregate carrying value of HK$593.1 million (31 December 2013: HK$371.9 million) to secure
bank loans and banking facilities of the Group.
The Group had an unutilised committed banking facility of HK$620.2 million as at 31 December 2014 (31
December 2013: Nil). The Group will continue to obtain financing on an unsecured basis whenever possible and
supplement such borrowings with secured financing.
Financial Ratios
The Group’s financial ratios at 31 December 2014 and 31 December 2013 are set out below:
31 December 31 December2014 2013
Net gearing ratio (the ratio of net debts to shareholders’ equity) 67.9% 67.1%
Liquidity ratio (the ratio of current assets to current liabilities) 1.05 1.10
Quick ratio (the ratio of current assets less inventories to current liabilities) 0.62 0.70
Net debt represents the Group’s total interest-bearing bank loans and other borrowings (including the liability
component of convertible bonds) less cash and cash equivalents and pledged deposits. At 31 December 2014,
net debt of the Group was HK$19,057.3 million (31 December 2013: HK$19,446.3 million).
23 2014 Annual Report CHINA AGRI-INDUSTRIES HOLDINGS LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS
Capital Expenditures
The total capital expenditures of the Group for the year ended 31 December 2014 are tabulated below:
2014 2013HK$ million HK$ million
Business units:
Oilseeds processing 1,238.2 862.0
Biochemical and biofuel 345.3 1,025.9
Rice processing and trading 239.8 433.0
Wheat processing 67.4 147.6
Brewing materials 53.0 16.2
Corporate and others 144.1 334.4
2,087.8 2,819.1
Capital Commitments
Please refer to note 36 of the Notes to financial statements of this annual report for the relevant details of capital
commitments.
Human ResourcesThe Group employed 29,643 (31 December 2013: 30,146) staff as at 31 December 2014. The Group’s
employees are remunerated based on job nature, individual performance and market trends with built-in merit
components. Total remuneration (excluding directors’ and chief executive’s remuneration) for the year ended 31
December 2014 was approximately HK$2,210.1 million (2013: HK$2,110.4 million). Employees in Hong Kong
receive retirement benefits, mostly in form of a Mandatory Provident Fund entitlement, and a similar benefit
scheme is offered to employees in Mainland China. Out of the total remuneration, pension scheme contribution
amounted to HK$230.0 million (2013: HK$205.2 million) for the year.
The Group adopted a share option scheme on 12 January 2007 to attract, retain and motivate senior
management personnel and key employees, and provide eligible participants with an opportunity to acquire equity
interests in the Company that would encourage them to work towards enhancing the value of the Company and
its shares.
Besides, the Group encourages employee participation in continuing training programmes, seminars and e-learning
courses, through which their career, knowledge and technical skills can be enhanced with the development of
individual potentials.
24
A summary of the results and of the assets, liabilities and non-controlling interests of the Group for the last
five financial years, as extracted from the published audited consolidated financial statements and restated as
appropriate, is set out below:
2014 2013 2012 2011 2010HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
RESULTS (Restated) (Restated) (Restated) (Restated)
REVENUE 93,238,734 94,543,022 91,319,186 82,349,859 53,491,700
PROFIT FROM OPERATING ACTIVITIES 297,424 2,647,069 2,413,625 4,620,530 1,463,290
Finance costs (650,467) (594,429) (883,683) (888,658) (376,878)
Share of profits and losses of associates 14,796 184,102 23,725 169,848 352,955
PROFIT/(LOSS) BEFORE TAX (338,247) 2,236,742 1,553,667 3,901,720 1,439,367
Income tax expense (310,335) (417,761) (189,106) (568,791) (185,994)
PROFIT/(LOSS) FOR THE YEAR (648,582) 1,818,981 1,364,561 3,332,929 1,253,373
Attributable to:
Owners of the Company (775,403) 1,568,453 1,180,389 2,396,092 1,671,666
Non-controlling interests 126,821 250,528 184,172 936,837 (418,293)
(648,582) 1,818,981 1,364,561 3,332,929 1,253,373
ASSETS, LIABILITIES ANDNON-CONTROLLINGINTERESTS
TOTAL ASSETS 78,561,321 82,769,284 74,547,986 70,036,207 56,685,965
TOTAL LIABILITIES (46,139,547) (50,036,828) (44,111,111) (44,926,182) (35,538,412)
NON-CONTROLLING INTERESTS (4,346,644) (3,749,753) (3,429,030) (3,146,272) (2,089,268)
28,075,130 28,982,703 27,007,845 21,963,753 19,058,285
25 2014 Annual Report CHINA AGRI-INDUSTRIES HOLDINGS LIMITED
IntroductionThe Company recognises the importance of corporate transparency and accountability. The directors of the
Company (the “Directors”) are committed in achieving a high standard of corporate governance practices and
procedures and striving for a transparent and accountable management framework on enhancing the interests of
shareholders. The corporate principles of the Company emphasise on upholding sound ethics and integrity in all
aspects of its businesses, and on ensuring that affairs are conducted in accordance with the applicable laws and
regulations.
During the year ended 31 December 2014, the Company has complied with all the code provisions and, where
appropriate, the applicable recommended best practices set out in the Corporate Governance Code (the “Code“)
contained in Appendix 14 to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong
Limited (the “Listing Rules”).
Corporate Governance Event Calendar 2014
Jan Directors’ briefing: Emergency response mechanism for food safety incidents.
Apr The Company was awarded the “Best Investor Relations Company” at 4th Asian Excellence
Recognition Awards 2014 by Corporate Governance Asia magazine.
Mr. Shi Bo, Executive Director of the Company, was honoured with an “Asia’s Best CFO” award at
4th Asian Excellence Recognition Awards 2014 by Corporate Governance Asia magazine.
Directors’ briefing: Risk management practices of our business division.
July The Company ranked No. 74 on the Fortune China 500 list in 2014.
Sep Thorough review and revision on the Corporate Governance Manual of the Board of Directors of the
Company.
Directors’ briefing: Exploring the range of existing diversity of the Board through a benchmarking
exercise.
Oct The Company was awarded “The Greater China Awards for Corporates (Environment – Food)” at
Asia Corporate Excellence Awards 2014 by The Asset magazine.
Securities Transactions by Directors and Relevant EmployeesThe Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model
Code”) contained in Appendix 10 to the Listing Rules as the principal standards of securities transactions for
the Directors. Upon specific enquiries on all the Directors, each of them confirmed that they have complied with
the required standards set out in the Model Code during the year ended 31 December 2014 in relation to their
securities dealings, if any.
26
CORPORATE GOVERNANCE REPORT
The Company has also adopted a code for securities transactions by relevant employees based on the Model
Code concerning dealings by the relevant employees in the securities of the Company (the “Employees Model
Code”). Relevant employees who are likely to be in possession of inside information related to the Group and its
activities must comply with guidelines set out in the Employees Model Code as exacting as those in the Model
Code. During the year, the Company has not received any non-compliance report from any of such employees.
Corporate Governance Structure
Shareholders Audit Committee
Nomination Committee
Remuneration Committee
Executive Committee
Board of Directors
Managing Director
Oilseeds Processing
Division
Biochemicaland Biofuel
Division
Rice Processingand Trading
Division
BrewingMaterialsDivision
WheatProcessing
Division
The BoardThe Board is responsible for the leadership and control of the Company and overseeing the Group’s business,
strategic decisions and performances. It is also responsible for performing corporate governance duties set out
in its own Code of Practice for the Board with terms of reference no less than those required under D.3.1 of the
Code. The management is delegated with the authority and responsibility by the Board for the management of the
Group. In addition, the Board has established various Board committees and delegated various responsibilities
to the Board committees including the audit committee (the “Audit Committee”), the remuneration committee
(the “Remuneration Committee”), the nomination committee (the “Nomination Committee”) (together, the “Board
Committees”) and the executive committee (the “Executive Committee”). All the Board Committees perform their
distinct roles in accordance with their respective terms of reference. Further details of these committees are set
out hereunder.
27 2014 Annual Report CHINA AGRI-INDUSTRIES HOLDINGS LIMITED
CORPORATE GOVERNANCE REPORT
Other than resolutions passed by means of resolutions in writing of all Directors, the Board held nine meetings
(including four independent non-executive Directors’ meetings, four regular Board meetings and one other
meeting) during the year to, among other things, consider and approve the interim and annual results of the
Group, discuss business strategy and consider financial budget for the year. The information on the number of
the Board meetings attended by each Director during the year is set out in the following table:
Board
Name of DirectorRegular
meetings
Meetings of independent
non-executive Directors
Other meeting
Chairman and Non-executive DirectorYU Xubo^ 4/4 N/A 1/1
Executive DirectorsYUE Guojun 4/4 N/A 1/1SHI Bo 4/4 N/A 1/1
Non-executive DirectorsNING Gaoning 1/4 N/A 0/1CHI Jingtao* N/A N/A N/AMA Wangjun 4/4 N/A 1/1WANG Zhiying# 4/4 N/A 1/1
Independent Non-executive DirectorsLAM Wai Hon, Ambrose 4/4 4/4 1/1Victor YANG 4/4 4/4 1/1Patrick Vincent VIZZONE 4/4 4/4 1/1
^ re-designated as a non-executive Director on 10 November 2014* appointed on 10 November 2014# resigned on 10 November 2014
The above table shows the positions held during the year. The latest composition of the Board is set out on page 1 of this annual report.
The Company adopts the practice of holding regular Board meetings at least four times a year. Notice of each
meeting is sent to Directors at least fourteen days prior to a regular Board meeting, and Directors may request
inclusion of matters in the agenda for Board meetings. For ad hoc Board meetings, reasonable notices are given.
It is the practice of the Company that minutes of meetings of the Board and Board Committees be recorded in
sufficient detail of the matters considered by the Board and Board Committees, decisions reached, including any
concerns raised by the Directors or dissenting views expressed. Draft and final versions of minutes of the Board
and/or Board Committees (as the case may be) are sent to the Directors, on average within 3 weeks after the
date of the respective meeting, for their comments and records respectively. The decisions of the Board can be
made via written resolutions authorised by all Directors.
All Board members have access to the advice and services of the company secretary. Minute books (including
minutes of meetings of all Board Committees) are kept by the company secretary and are open for inspection
during office hours on reasonable notice by any Director.
28
CORPORATE GOVERNANCE REPORT
If necessary, Directors also have access to external professional advice at the Company’s expense.
The Board, having reviewed the work implemented and executed during the year and collected opinions of the
senior management during the course of review, considers that it has effectively discharged its responsibilities
and maintained the interests of the shareholders and the Company.
During the year, the Board convened two general meetings. The Directors (Messrs. Yu Xubo, Yue Guojun, Shi
Bo, Wang Zhiying, Lam Wai Hon, Ambrose and Patrick Vincent Vizzone) together with the management and
independent auditors’ representatives attended the annual general meeting of the Company held on 5 June 2014.
The Directors (Messrs. Yue Guojun, Shi Bo, Lam Wai Hon, Ambrose, Victor Yang and Patrick Vincent Vizzone)
together with the management and independent financial adviser’s representatives attended the extraordinary
general meeting held on 12 December 2014.
Chairman and Managing DirectorThe chairman of the Board is Mr. Yu Xubo and the chief executive officer (or managing directors, in the case of
the Company) is Mr. Yue Guojun. The chairman’s and the managing director’s roles are clearly defined to ensure
their respective independence.
The chairman takes lead in formulating the overall strategies and policies of the Group, and ensures effective
performance by the Board of its functions, including compliance with good corporate governance practices, and
encourages and facilitates active contribution of Directors in Board activities and constructive relations between
executive and non-executive Directors. The chairman also ensures that a system of effective communication with
shareholders of the Company and receipt by the Directors of adequate and complete information is in place.
The managing director, as the chairman of the Executive Committee, supported by other Board members and
the senior management, is responsible for the daily business operations and management of the Group. He is
accountable to the Board for the implementation of the Group’s overall strategies as well as co-ordination of
overall business operations.
Board CompositionSince February 2015, the number of Directors has been increased to ten, of which two are executive Directors,
four are non-executive Directors, and four are independent non-executive Directors. Each Director brings
complementary skills, knowledge, experience and perspectives to the governance of the Company.
The Board members have no financial, business, family or other material or relevant relationships with each other.
The composition of the Board has satisfied the requirement under Rule 3.10A of the Listing Rules for the Board
to have at least one-third of its members comprising independent non-executive Directors.
The Company has received annual written confirmations from each of the independent non-executive Directors
confirming their independence in accordance with Rule 3.13 of the Listing Rules. The Board has assessed
their independence and concluded that all the independent non-executive Directors are independent within the
definition of the Listing Rules.
29 2014 Annual Report CHINA AGRI-INDUSTRIES HOLDINGS LIMITED
CORPORATE GOVERNANCE REPORT
Appointment, Re-election and RemovalCurrently, each of the Directors has a specific term of appointment for three years.
Pursuant to Article 106 of the articles of association of the Company (the “Articles of Association”), at every annual general meeting, one-third of the Directors or, if their number is not a multiple of three, then the number nearest to and at least one-third shall retire from office by rotation at least once every three years. Further, pursuant to Article 111 of the Articles of Association, the newly appointed Director shall retire at the next following general meeting. A retiring Director shall be eligible for re-election. The Company considers that sufficient measures have been taken to ensure that the Company’s practices in appointment of Directors are no less stringent than those set out in the Code.
Mr. Chi Jingtao, who was appointed in November 2014, was re-elected by shareholders at the extraordinary general meeting of the Company held on 12 December 2014. Therefore, pursuant to the above-mentioned Articles 106 and 111 of the Articles of Association, Messrs. Ning Gaoning, Ma Wangjun, Lam Wai Hon, Ambrose, Victor Yang and Ong Teck Chye will retire at the forthcoming 2015 annual general meeting of the Company and, being eligible, each of them have offered himself for re-election.
To enable shareholders of the Company to make an informed decision on the re-election of Directors, the biographies of the retiring Directors are set out in this annual report under the section “Directors and Senior Management Profile”, which demonstrates a diversity of skills, expertise, experience and qualifications among the Directors.
Responsibilities of Directors and TrainingThe Company ensures that every newly appointed Director has a proper understanding of the operations and businesses of the Group and that he is fully aware of his responsibilities under statute and common law, the Listing Rules, applicable legal requirements and other regulatory requirements and the business and governance policies of the Company. The Company sponsors Directors to attend professional development seminars where necessary. In addition, the Company’s legal adviser would provide training (including any update) on the Listing Rules and regulatory requirements (if required) to the Directors. A summary of training received by the Directors during the year according to the records provided by the Directors is set out below.
Name of DirectorAttending briefings,
seminars or conferences
Reading materials relevant to the director’s duties
and responsibilities
Chairman and Non-executive DirectorYU Xubo^ ✓ ✓
Executive DirectorsYUE Guojun ✓ ✓SHI Bo ✓ ✓
Non-executive DirectorsNING Gaoning ✓ ✓CHI Jingtao* ✓ ✓MA Wangjun ✓ ✓WANG Zhiying# ✓ ✓
Independent Non-executive DirectorsLAM Wai Hon, Ambrose ✓ ✓Victor YANG ✓ ✓Patrick Vincent VIZZONE ✓ ✓
^ re-designated as a non-executive Director on 10 November 2014* appointed on 10 November 2014# resigned on 10 November 2014
The above table shows the positions held during the year. The latest composition of the Board is set out on page 1 of this annual report.
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CORPORATE GOVERNANCE REPORT
The independent non-executive Directors take an active role in Board meetings, contribute to the development of
strategies, internal control and policies and make independent judgment on issues relating to the Group. They will
take lead where potential conflicts of interest arise. The independent non-executive Directors also represented
the majority in all three of the Nomination Committee, the Remuneration Committee and the Audit Committee to
ensure sufficient independence in the Board’s decision making process.
Board Committees
Nomination Committee
The Nomination Committee was established on 16 February 2007 with specific written terms of reference in
accordance with the requirements of the Code. It is chaired by the chairman of the Board and comprises a
majority of independent non-executive Directors. The terms of reference of the Nomination Committee are
available in writing upon request to the company secretary and on the Company’s website. The Nomination
Committee currently comprises Mr. Yu Xubo (chairman of the Board and non-executive Director) as the chairman
of the Nomination Committee, Mr. Chi Jingtao (non-executive Director), Mr. Lam Wai Hon, Ambrose, Mr. Victor
Yang, Mr. Patrick Vincent Vizzone and Mr. Ong Teck Chye (independent non-executive Directors).
The Nomination Committee is primarily responsible for the procedures of nominating and appointing appropriate
person to be a director, either to fill a casual vacancy or as an addition to the Board.
During the year, the Nomination Committee held two meetings to review the composition of the Board and the
Board Committees, to consider matters regarding the rotation of retirement of Directors at the annual general
meeting, and to consider developing diversity on the Board. Details of attendance of each Nomination Committee
member during the year are as follows:
Name of Nomination Committee Member
No. of Nomination Committee
meetings held during
the year
No. of Nomination Committee
meetings attended
Attendance rate
YU Xubo (Chairman) 2 2 100%CHI Jingtao* N/A N/A N/AWANG Zhiying# 2 1 50%LAM Wai Hon, Ambrose 2 2 100%Victor YANG 2 2 100%Patrick Vincent VIZZONE 2 2 100%
* appointed on 10 November 2014# resigned on 10 November 2014
The latest composition of the Nomination Committee is set out on page 1 of this annual report.
31 2014 Annual Report CHINA AGRI-INDUSTRIES HOLDINGS LIMITED
CORPORATE GOVERNANCE REPORT
In carrying out its responsibilities, the Nomination Committee is guided by its specific terms of reference and the
established nomination procedures and criteria, including the policy concerning diversity adopted on 28 August
2013 and the procedures for proposing a person for election as a director adopted on 28 March 2012 (both
documents are available on the Company’s website). The Company aims to build and maintain diversity on the
Board. In identifying and nominating suitable candidates for appointment to the Board, the Company will consider
candidates on merit, having due regard to the benefits of all aspects of diversity including, but not limited to,
mix of skills, experience, industry background, gender and thinking styles. In reviewing the Board composition,
the Company will consider the appropriate range and balance of expertise, experience, skills and diversity
required for the Board to fulfill its duties. In March 2014, the Nomination Committee made a recommendation
to the Board regarding measurable objectives for achieving diversity on the Board in accordance with the board
diversity policy. The recommendation was adopted by the Board. Accordingly, the company secretary conducted
a benchmarking exercise for the purposes of exploring the range of existing diversity and promoting discussion
among Directors on various aspects of diversity. The Company thereafter engaged an executive search
consultant to identify potential director talent to meet the needs of the Company. The Nomination Committee also
reviewed the structure of the Board according to the board diversity policy. The Company will continue implement
a number of programs to support our commitment to improve diversity. The focus for the year is on ensuring that
diversity is integral to the nomination/appointment process and a deeper understanding of the range of existing
diversity.
The executive Directors were appointed based on their qualifications and experience in relation to the Group’s
businesses. The non-executive Directors were appointed based on their qualifications and experience within
COFCO Corporation and its subsidiaries. The independent non-executive Directors were appointed based on
their professional qualifications and experience in their respective areas.
The circular of the Company dated 24 April 2015 contains detailed information on re-election of Directors
including biographies of those Directors standing for re-election to enable shareholders to make informed
decisions.
Remuneration Committee
The Remuneration Committee was established on 16 February 2007 with specific written terms of reference in
accordance with the requirements of the Code. It comprises a majority of independent non-executive Directors
and is chaired by an independent non-executive Director. The terms of reference of the Remuneration Committee
are available in writing upon request to the company secretary and on the Company’s website. The Remuneration
Committee currently comprises Mr. Victor Yang (independent non-executive Director) as the chairman of the
Remuneration Committee, Mr. Ma Wangjun and Mr. Chi Jingtao (non-executive Directors), Mr. Lam Wai Hon,
Ambrose, Mr. Patrick Vincent Vizzone and Mr. Ong Teck Chye (independent non-executive Directors).
The primary role of the Remuneration Committee is to make recommendations to the Board on the Company’s
policy and structure for remuneration of Directors and senior management.
The Remuneration Committee is delegated with authority and responsibility to determine the remuneration
packages of individual executive Directors and senior management. It may consult with the chairman and
Managing Director of the Company regarding proposals for the remuneration of other executive Directors. The
remuneration of the non-executive Directors is determined by the Remuneration Committee or recommended to
the Board for review. Where necessary, the Remuneration Committee may seek professional advice of an external
expert at the Company’s expenses.
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CORPORATE GOVERNANCE REPORT
The existing remuneration policy of the executive Directors is determined by the Remuneration Committee
having considered the qualifications and experience of each of the executive Directors and with reference to the
remuneration policy of other listed companies of similar business and size. The remuneration policy of the non-
executive Directors and the independent non-executive Directors is determined by their participation in the Board
and the Board Committees.
During the year, the Remuneration Committee held three meetings to review the Company’s performance
assessment system and the remuneration packages of several executive Directors and senior management,
and to make recommendation on the emolument of non-executive Directors. Details of attendance of each
Remuneration Committee member during the year are as follows:
Name of Remuneration Committee Member
No. of Remuneration
Committee meetings
held during the year
No. of Remuneration
Committee meetings attended
Attendance rate
Victor YANG (Chairman) 3 3 100%CHI Jingtao* N/A N/A N/AMA Wangjun 3 2 67%WANG Zhiying# 3 2 67%LAM Wai Hon, Ambrose 3 3 100%Patrick Vincent VIZZONE 3 3 100%
* appointed on 10 November 2014# resigned on 10 November 2014
The latest composition of the Remuneration Committee is set out on page 1 of this annual report.
For the year ended 31 December 2014, the remuneration of senior management (excluding Directors) falls into
two bands, three individuals in the range of HK$1,000,001–HK$2,000,000 and two individuals in HK$2,000,001–
HK$3,000,000. Such amount includes equity-settled share option expenses and pension scheme contributions.
Details of the remuneration of the Directors for the year ended 31 December 2014 are set out in note 8 to the
financial statements.
Audit Committee
The Audit Committee was established on 16 February 2007 with specific written terms of reference which clearly
deal with its authority and duties. The terms of reference of the Audit Committee are available in writing upon
request to the company secretary and on the Company’s website. The Audit Committee currently comprises Mr.
Lam Wai Hon, Ambrose (independent non-executive Director) as the chairman of the Audit Committee, Mr. Chi
Jingtao and Mr. Ma Wangjun (non-executive Directors), Mr. Victor Yang, Mr. Patrick Vincent Vizzone and Mr. Ong
Teck Chye (independent non-executive Directors). In compliance with Rule 3.21 of the Listing Rules, the chairman
of the Audit Committee has possessed the appropriate professional and accounting qualifications.
33 2014 Annual Report CHINA AGRI-INDUSTRIES HOLDINGS LIMITED
CORPORATE GOVERNANCE REPORT
During the year, the Audit Committee held three meetings with the external auditors and/or the senior
management of the Company to review and discuss, among other things, the financial reporting and audit
planning, internal control and the financial results of the Group. Details of attendance of each Audit Committee
member during the year are as follows:
Name of Audit Committee Member
No. of Audit Committee
meetings held during
the year
No. of Audit Committee
meetings attended
Attendance rate
LAM Wai Hon, Ambrose (Chairman) 3 3 100%Victor YANG 3 3 100%Patrick Vincent VIZZONE 3 3 100%CHI Jingtao* 1^ 1 100%MA Wangjun 3 3 100%WANG Zhiying# 2^ 2 100%
^ by reference to the number of meetings held during his tenure* appointed on 10 November 2014# resigned on 10 November 2014
Under its terms of reference, the Audit Committee shall assist the Board in fulfilling its corporate governance
and oversight responsibilities in relation to financial reporting, internal control, risk management and external
audit functions. In the meantime, it is the management’s duty to ensure the Company maintains an adequate
amount of qualified and experienced staff (the information on the number of Certified/Chartered Accountants of
the Company are listed below) for its accounting and financial reporting function. The Audit Committee is further
authorised by the Board to investigate any activity within its terms of reference, and may make recommendations
to the Board to take appropriate actions emanating from such investigations. The Audit Committee has
unrestricted access to personnel, records, external auditors and senior management, as may be appropriate in
discharging its functions.
Certified/Chartered Accountants in the Company
Name of Professional Institution No. of staff
The Chinese Institute of Certified Public Accountants 23Association of Chartered Certified Accountants 2*Hong Kong Institute of Certified Public Accountants 2American Institute of Certified Public Accountants 1**CPA Australia 1Certified General Accountants Association of Canada 1***
* One of these two individuals is also a member of the Hong Kong Institute of Certified Public Accountants.** This individual is also a member of the Hong Kong Institute of Certified Public Accountants.*** This individual is also a member of the Chinese Institute of Certified Public Accountants.
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CORPORATE GOVERNANCE REPORT
Executive Committee
The Executive Committee was established on 27 February 2009 with specific written terms of reference.
Previously, the Executive Committee had three members. After the re-designation of Mr. Yu Xubo as non-
executive Director on 10 November 2014, the Executive Committee comprises two members, namely Mr. Yue
Guojun, the Managing Director, as the chairman of the Executive Committee and Mr. Shi Bo.
Under its terms of reference, the primary responsibility of the Executive Committee is to deal with and supervise
the day-to-day business operations, management and administration of the Company.
Auditors’ RemunerationDuring the year under review, the remunerations paid or payable to Ernst & Young in respect of its audit services
and non-audit services are HK$5.1 million and HK$1.2 million, respectively. The non-audit services mainly
included tax consultancy and business advisory services.
Accountability and AuditThe Directors acknowledge their responsibilities for preparing all information and representations contained in
the financial statements of the Company for the year under review. The Directors consider that the financial
statements have been prepared in conformity with the generally accepted accounting principles in Hong Kong,
and reflect amounts that are based on the best estimates and reasonable, informed and prudent judgment
of the Board and the management. After appropriate enquires, the Directors were not aware of any material
uncertainties relating to events or conditions which may cast significant doubt upon the Company’s ability to
continue as a going concern. Accordingly, the Directors have prepared the financial statements of the Company
on a going concern basis.
The Company’s operating results for the year ended 31 December 2014 were reviewed by the management
during the annual management meeting. Management personnel of all business units and functional departments
of the Company had attended the meeting and the Managing Director presented the Company’s overall and
divisional operating results during the meeting. Variations from the budget and from the previous year’s results
were reviewed and analysed. In this review process, the management identified the effects of the key risk factors
that affected the Company’s businesses during the year and consolidated them with their expectations of the
business performance they accumulated during their daily management of the businesses to form a basis for
comparison and verification of the details of the reported operating results for the year.
Based on the results of the above management review and the business risks identification, an overall business
strategy of the Company for the coming year was also developed during this annual management meeting. To
ensure the achievement of the goals and objectives set for the coming year, this overall business strategy also
includes plan for continuing risks assessment and the development of the necessary internal control procedures.
The Company has announced its annual results for the financial year ended 31 December 2014 on 25 March
2015. An independent Auditors’ Report is included in this annual report on pages 64 and 65.
35 2014 Annual Report CHINA AGRI-INDUSTRIES HOLDINGS LIMITED
CORPORATE GOVERNANCE REPORT
Internal ControlThe Board acknowledges that a properly designed internal control system is one of the key elements to monitor
and safeguard the resources of the Group; to produce reliable financial reports for the shareholders of the
Company, and to enhance better corporate governance and compliance in return reduces the possibility of
significant errors and irregularities by timely detection.
The COSO (the Committee of Sponsoring Organisations of the Treadway Commission) framework is adopted by
the Company in developing its internal control system. The major elements of the governance framework include
a stable control environment that supports sustainable growth, a comprehensive risk management system, a
system of effective control activities, an efficient information and communications system, and a management
monitoring process. The Board empowered the management with the responsibilities and the necessary
authorities to develop and implement an effective system of internal controls.
Business objectives set by the Board were fully discussed among the management team during the annual
management meeting. Risks associated with achieving or not achieving these objectives were identified and
assessed during these management discussions. Based on the results of these discussions, the management
developed detailed business strategies for the year. These strategies include the plan for the development and
the implementation of the necessary control activities and management monitoring process. Periodic review
on the effectiveness of these business strategies are performed by the management to ensure the necessary
adjustments be made to accommodate the changes in internal and external environment. The Company’s
risk management departments which report directly to the Managing Director are responsible for overseeing
the Company’s overall risk management practice and the related policies setting process (also refer to the
“Risk Management” section of this annual report for details regarding the development of the Company’s Risk
Management System).
Internal AuditThe Company’s Audit and Supervision Department is led by the General Manager of Audit and Supervision
Department and has recruited professionals to enrich the team. The General Manager of Audit and Supervision
Department reports directly to the Audit Committee and the Managing Director and attends all Audit Committee
and Board of Directors’ meetings.
The Audit and Supervision Department’s primary responsibilities include:
• Assist the Audit Committee in its review of the Company’s overall system of internal controls;
• Perform reviews on the design and the proper implementation of policies, procedures and controls of all
major business units and functional departments;
• Perform reviews on the compliance status on rules and regulations that are relevant to the Company’s
businesses;
• Perform efficiency and compliance reviews on major investment and construction projects; and
• Perform special reviews on areas of concern identified by the Audit Committee or the management.
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CORPORATE GOVERNANCE REPORT
An annual internal audit plan is prepared by Audit and Supervision Department based on a risk-based auditing
approach. The approach focuses on the internal controls of material transactions and operations of major
business units and functional departments. The annual internal audit plan is reviewed and approved by the Audit
Committee at the beginning of each year.
In addition to the review of the Company’s internal control activities, Audit and Supervision Department is also
responsible for providing recommendations to the Board on the continuing development of other aspects of the
Company’s internal control framework, including the risk management process, information and communication
system and management monitoring process.
Internal Control ReviewThe Board assesses the effectiveness of the overall system of internal control by considering reviews performed
by the Audit Committee, the management, as well as both internal and external auditors with the understanding
that such system is an ongoing process to identify, evaluate and manage significant risks faced by the Group.
The internal control system of the Group has been in place and was functioning effectively for the year under
review and the process is regularly reviewed.
Whistle-blowing PolicyA whistle-blowing policy was set up by the Company to ensure inappropriate business practices and behaviors
are properly reported and handled. The policy includes the set up of an electronic reporting mailbox. The Audit
Committee and the Managing Director have full access to this mailbox. Follow up review will be performed by the
Audit and Supervision Department on the request of the Audit Committee or the Managing Director. Procedures
and controls are in place to ensure the informant’s identity is kept confidential.
Corporate Social ResponsibilityThe Company values stakeholders’ expectations and concerns, and actively communicates with stakeholders.
In the Company’s 2014 Corporate Social Responsibility Report, we have prepared a summary on our works
in accordance with the ten principles of the United Nations Global Compact, the Global Reporting Initiative’s
Sustainability Reporting Guidelines and the Environmental, Social and Governance Reporting Guide contained
in Appendix 27 to the Listing Rules. Electronic copy of the 2014 Corporate Social Responsibility Report can be
accessed and downloaded from the Company’s website.
37 2014 Annual Report CHINA AGRI-INDUSTRIES HOLDINGS LIMITED
CORPORATE GOVERNANCE REPORT
Shareholders’ RightsThe Company is committed in engaging constructive communication with its shareholders through a variety of
channels, including through its corporate communications, website, general meetings and investor relations
activities. Shareholders who wish to put enquiries to the Board may send communications to: The Board of
Directors c/o Company Secretary, by post to the registered office of the Company. All communications will be
forwarded to the Board or the individual directors on a regular basis.
Every shareholder has a right to make their views known through voting at a general meeting. The annual
general meeting (the “AGM”) will be held on 3 June 2015. The AGM provides shareholders the opportunity to
communicate with the Board on a wide range of issues relating to the affairs of the Company. Shareholders
who wish to attend and vote may request to be entered into the register of members by its closure for the
AGM. A corporate shareholder may participate by its authorised representative. Subject to applicable laws and
regulations, qualified shareholders may exercise their rights to request circulation of resolution for the AGM.
Shareholders holding at least 2.5% of the total voting rights of all shareholders, or at least 50 shareholders, who
have a right to vote on the resolution at the AGM, may submit a written request to the Company. The circulation
request must identify the resolution, accompanied by a statement of not more than 1,000 words with respect to
the matter mentioned in the proposed resolution, and must be authentication by the requisitionists and sent to
the Company’s registered office in hard copy for the attention of the company secretary (which must be received
by the Company at least 7 days before the relevant meeting). If the requisition is to propose nomination of a
person other than a director of the Company for election as a director at the AGM, that person’s consent to be
elected and biographical details as required by Rule 13.51(2) of the Listing Rules should also be provided. Upon
verification that the requisition is proper and in order, the company secretary will propose the Board to include
the resolution on the agenda for the AGM.
Only persons with proper authority have the right to requisition for and convene a general meeting. According to
applicable laws and regulations, shareholders holding at least 5% of the total voting rights of all the shareholders
having a right t